Business Law: Amanda Crowe on how mediation can help a family business in the event of divorce
- Credit: Archant
There are many spouses or civil partners who run highly successful businesses together.
However, when fractures begin to occur in their personal relationship, the wellbeing of their business is threatened. If the worst case scenario happens, and the couple look to divorce or dissolve their civil partnership, sometimes the business will never recover.
The traditional court approach to separating couples’ finances on divorce or the dissolution of a civil partnership is an unhelpful contributor in this regard. The court tends to adopt a “one size fits all” approach to valuing businesses and has a set of orders it is likely to make with regards to them.
A business can be transferred to one party, with the other receiving a lump sum for his/her share in it. Alternatively, although not so often, the court can decide to order that a business is to be sold, with each party receiving a share of the sale proceeds. Rarely does the court contemplate both parties remaining in the business, although this may be something that a couple aspire to do.
Couples in business contemplating divorce or the dissolution of a civil partnership may wish to consider mediation as an alternative and more flexible form of dispute resolution. Through compromise and a detailed review of the financial picture, couples can hopefully reach an agreement that is fair and reasonable for both of them.
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At an early stage discussions can take place about whether or not the business should be valued, who should value it and what approach should be taken. The rationale behind setting up the business and the parties’ hopes for the future can be fully explored. There are no automatic assumptions about sales or transfers and the parties retain control of the outcome at all times.
Mediation is a voluntary process and is not suitable for all circumstances. However, where there is a high degree of trust, honesty and co-operation between parties it represents a dignified and useful tool for resolving disputes, and one that couples should strongly consider as an alternative to the costly court system.
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: : Amanda Crowe, is a solicitor within the family team at Barker Gotelee.